Transition to retirement with GESB Super

With a transition to retirement strategy, you can access your super as regular income while you’re still working.

Once you’ve reached your Commonwealth preservation age, you can use your super to start a regular pension, such as our Transition to Retirement Pension. This type of pension is known as a ‘non-commutable income stream’ because it doesn’t allow lump-sum withdrawals while you’re working.

There are three ways to use transition to retirement:

  • Increase your super - you'll continue to work and can sacrifice some of your salary to super
  • Reduce your hours - you can work less without reducing your overall income, as your pension can make up for your lower salary
  • Increase your income - you'll be receiving an income stream from a pension as well as your normal salary

You can find the right balance to suit your needs, with the flexibility to change your strategy. We recommend that you speak with a financial adviser, accountant or tax adviser to help you decide if transition to retirement is right for you.

Read the case study below to find out how transition to retirement works with GESB Super.

Meet John, age 60

  • John has an annual salary of $72,000 and a GESB Super benefit of $346,600.
  • He decides to transfer all but $1,000 of his super benefit to our Transition to Retirement Pension. No tax applies on the transfer because GESB Super is a taxed scheme.
  • As John is 60, the income he receives from his pension is tax free.

Here are some examples of how John could use transition to retirement.

1. John could increase his super

If John doesn’t need the extra income, he could take advantage of tax benefits to increase his super in preparation for retirement.

John chooses an annual income payment of 5% of his pension account balance. He continues to work full time, while sacrificing part of his salary to super.

Transition to Retirement Pension and increase your super
 

Before Transition to Retirement Pension

After Transition to Retirement Pension

Employer salary

$72,000

$72,000

Less salary sacrifice

-

$18,1601

Employer salary after salary sacrifice

$72,000

$53,840

Plus Transition to Retirement Pension income

-

$17,280

Taxable income

$72,000

$53,840

Less tax (including 2% Medicare Levy)

$15,307

$8,8492

Net (after tax) income

$56,693

$62,271

As John is 60, his concessional (before-tax) contributions cap for 2020/21 is $25,0003.
John’s concessional contributions include his employer’s 9.5% Superannuation Guarantee (SG) of $6,840. This means he can salary sacrifice up to $18,160. If John goes over his cap, then he might have to pay more tax.

By not changing his working arrangements and salary sacrificing, he has contributed $18,160 to his GESB Super account, while only reducing his pension account by $17,280.

Please note there is a contributions tax for very high income earners.

Find out more about salary sacrifice.

Option 2. John could reduce his working hours

John decides to work part time and receive the maximum annual income payment (10% of his pension account balance). For the first year John will receive $34,560.

Transition to Retirement Pension and reducing your hours of work
Before Transition to Retirement Pension After Transition to Retirement Pension

Employer salary

$72,000

$36,000

Less salary sacrifice

-

-

Employer salary after salary sacrifice

$72,000

$36,000

Plus Transition to Retirement Pension income

-

$34,5602

Taxable income

$72,000

$36,000

Less tax (including 2% Medicare Levy)

$15,3073

$3,4028

Net (after-tax) income

$56,693

$67,158

By halving his work hours and receiving $34,560 from his pension, John has increased his net income by $10,465 in the first year.

However, his pension account has decreased by 10% from the income payments. In this example, John hasn’t increased his super by salary sacrificing. However, he can still choose to have his SG contributions made to his GESB Super account, which will start building his super again. The amount of these contributions will be less due to his lower salary.

Option 3. John could increase his income

John continues to work full time. He chooses the maximum annual income payment (10% of his pension account balance). In the first year, John will receive $34,560 from his pension.

Transition to Retirement Pension and increasing your income
Before Transition to Retirement Pension After Transition to Retirement Pension

Employer salary

$72,000

$72,000

Less salary sacrifice

-

-

Employer salary after salary sacrifice

$72,000

$72,000

Plus Transition to Retirement Pension income

-

$34,5602

Taxable income

$72,000

$72,000

Less tax (including 2% Medicare Levy)

$15,3073

$15,3073

Net (after-tax) income

$56,693

$91,2539

By not changing his working arrangements, John has increased his net income by $34,560 in the first year. Although John’s pension account has been reduced by 10%, any contributions to his GESB Super account will start building his super again.

Your next steps

Before you decide to start a transition to retirement strategy, you should read the Retirement Income Pension Product Information Booklet. Our seminars and Retirement Options Service are also available to help you make an informed decision.

Once you've explored your options and decided that transition to retirement is right for you, you're ready to set up a Transition to Retirement Pension.

1 Salary packaged into GESB Super. GESB Super is a taxed scheme and concessional contributions are generally taxed at 15%. The concessional contributions cap is set at $25,000 for the 2020/21 financial year. We have assumed John has no unused concessional cap carry forward amounts available, and that John's employer has made Superannuation Guarantee contributions at the standard rate of 9.5% (to a total of $6,840 for the year). $25,000 - $6,840 = $18,160).
2 As John is aged 60, his income from an allocated pension is tax free.
3 Includes the low and middle income tax offset of $1,080.
4 Includes low income tax offset of $192 and low and middle income tax offset of $1,080 (total tax offset: $1,272).
5 Calculated as taxable income less tax (i.e. $53,840 - $8,849 = $44,991), plus Transition to Retirement Pension income ($17,280).
6 The general concessional contributions cap is $25,000 for the 2020/21 financial year, indexed annually in line with Average Weekly Ordinary Time Earnings in increments of $2,500 rounded down. 
7 As of 1 January 2020, salary sacrificing will not affect the amount an employer must contribute into your super. The current SG Rate is 9.5%, which means John's employer will contribute $6,840 into his super account. If this rate increases in future, John may need to reduce his salary sacrifice to avoid exceeding his concessional contributions cap.
8 Includes the low income tax offset of $445 and low and middle income tax offset of $255 (total tax offset: $700).
9 Calculated as taxable income less tax (i.e. $72,000 - $15,307 = $56,693), plus Transition to Retirement Pension income ($34,560).

Page last updated 24 June 2020